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Nistra v. Reliance Trust Co.

United States District Court, N.D. Illinois, Eastern Division

February 13, 2018

ARTUR A. NISTRA, on behalf of The Bradford Hammacher Group, Inc. Employee Stock Ownership Plan and a class of all others similarly situated, Plaintiff,
v.
RELIANCE TRUST COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          Gary Feinerman Judge.

         On behalf of The Bradford Hammacher Group, Inc. Employee Stock Ownership Plan, Artur Nistra brings this putative class action under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., alleging that Reliance Trust Company, as Plan trustee, breached its fiduciary duties to the Plan by causing it to engage in transactions prohibited by ERISA. Doc. 140. Nistra has moved to certify a class of Plan participants under Federal Rule of Civil Procedure 23. Doc. 90. The motion is granted.

         Background

         The Bradford Hammacher Group, Inc. is a closely held corporation with headquarters in Illinois. Doc. 140 at ¶¶ 6-7. Bradford established the Plan in 2013 and appointed Reliance as trustee. Id. at ¶¶ 8, 17. Nistra and 753 others are participants in the Plan. Id. at ¶¶ 32, 55. At some point after the Plan was established, shareholders of Bradford and its affiliates redeemed 100 percent of their common stock for $275 million. Id. at ¶ 22. Bradford then issued 600, 000 new shares of Class A common stock and sold them all to the Plan in exchange for a $100, 000, 000 note. Id. at ¶ 19, 22.

         Nistra alleges that Reliance violated its fiduciary duties to the Plan by causing it to borrow money from Bradford and to purchase Bradford stock at less than fair market value, and by acting for the benefit of Bradford in connection with the transaction. Id. at ¶¶ 41-46 (citing 29 U.S.C. § 1106(a)(1)(B), (a)(1)(E), (b)(2), (b)(3)). Nistra seeks relief under 29 U.S.C. § 1109(a), which “imposes personal liability on the fiduciary whose breach of the obligations imposed by the statute results in a loss to the plan.” Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 481 (7th Cir. 2010). “Pursuant to [29 U.S.C. §] 1132(a)(2), a plan participant or beneficiary” such as Nistra “may commence a civil action for appropriate relief under section 1109(a), but she may do so only in a representative capacity on behalf of the plan, not in her own behalf.” Id. at 481-82.

         Nistra seeks relief on behalf of the Plan, and moves to certify this class:

All persons who were participants in The Bradford Hammacher Group, Inc. Employee Stock Ownership Plan. Excluded from the Plaintiff Class are the officers and directors of The Bradford Hammacher Group, Inc. and legal representatives, successors, and assigns of any such excluded persons. Also excluded from the Plaintiff Class are those individuals, trusts and their family members that redeemed or sold their shares in the Bradford Group and its affiliates and/or Hammacher, Schlemmer & Company, Inc. to Bradford in 2013.

Doc. 140 at ¶ 54.

         Discussion

         The court's analysis of class certification “is not free-form, but rather has been carefully scripted by the Federal Rules of Civil Procedure.” Chi. Teachers Union, Local No. 1. v. Bd. of Educ., 797 F.3d 426, 433 (7th Cir. 2015). To be certified, a proposed class must satisfy the four requirements of Rule 23(a): “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a); see Bell v. PNC Bank, N.A., 800 F.3d 360, 373 (7th Cir. 2015). If Rule 23(a) is satisfied, the proposed class must fall within one of the three categories in Rule 23(b), which the Seventh Circuit has described as: “(1) a mandatory class action (either because of the risk of incompatible standards for the party opposing the class or because of the risk that the class adjudication would, as a practical matter, either dispose of the claims of non-parties or substantially impair their interests), (2) an action seeking final injunctive or declaratory relief, or (3) a case in which the common questions predominate and class treatment is superior.” Spano v. Boeing Co., 633 F.3d 574, 583 (7th Cir. 2011); see also Bell, 800 F.3d at 373. Finally, the class must be “identifiable as a class, ” meaning that the “class definition[] must be definite enough that the class can be ascertained.” Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006); see also Mullins v. Direct Dig., LLC, 795 F.3d 654, 659-61 (7th Cir. 2015).

         Nistra bears the burden of showing that each requirement is satisfied. See Chi. Teachers Union, 797 F.3d at 433; Messner v. Northshore Univ. HealthSys., 669 F.3d 802, 811 (7th Cir. 2012). As the Seventh Circuit has explained, “a district court must make whatever factual and legal inquiries are necessary to ensure that requirements for class certification are satisfied before deciding whether a class should be certified, even if those considerations overlap the merits of the case.” Am. Honda Motor Co. v. Allen, 600 F.3d 813, 815 (7th Cir. 2010); see also Kartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883, 889-90 & n.6 (7th Cir. 2011). The Seventh Circuit has instructed district courts to exercise “caution” before certifying a class. Thorogood v. Sears, Roebuck & Co., 547 F.3d 742, 746 (7th Cir. 2008). That caution demands a close look at each Rule 23 requirement, even where, as here, the defendant does not contest most of them.

         I. Ascertainability

         An ascertainable class is “defined clearly and based on objective criteria.” Mullins, 795 F.3d at 659. “Class definitions have failed this requirement when they were too vague or subjective, or when class membership was defined in terms of success on the merits (so-called ‘fail-safe' classes).” Id. at 657. Nistra's proposed class is easily ascertainable because it is based on clear, objective criteria-all Plan participants except for Bradford's officers and directors (and their legal representatives) and those participants who redeemed Bradford stock in 2013.

         II. ...


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